Living to 100… Is 100 the New 80?

Q1 | March 2021

Topic: Wealth Planning

Brad Weber CPA, CA, CFP

March 25, 2021

Image used with permission: iStock/kajakiki


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Living to 100… Is 100 the New 80?

Q1 | March 2021

It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all the time, we don’t really know when our final chapter will come. However, the trend line of history shows us that life expectancy has been increasing.

Look at Canada. Not only is our population growing, but it’s getting older at the same time. In 2019 Canada reported 10,000 citizens who were at least 100 years old. According to Statistics Canada, that figure is likely to double in 15 years and could reach almost 80,000 by 2061. Even now, women’s life expectancy is age 84, and for men, it’s age 80. Those figures are calculated at birth, and the older you get, the longer your probable life expectancy. If you are 65 now, you can tack on another two years to those estimates. And don’t forget, those are averages, so we know many people will live beyond that.

While drinking from the fountain of youth sounds good in theory, there are both opportunities and challenges with longevity. If you consider time is precious, then more of it is a good thing: time to spend with family and friends and experience the things you enjoy. But a longer life doesn’t necessarily mean they will all be healthy years. Health care over the long term, and the quality of that care, will become important. There are behavioral and social aspects of aging that need to be considered and potentially end-of-life planning. And, of course, there are retirement considerations. You might spend a third of your life in retirement, and you should consider if you’ll have the financial resources to support yourself for that long of a time.

A key consideration in any retirement planning exercise is understanding your spending. The first thing to do is at least consider these needs over an extended period. It’s common at Nexus for us to review projections out to age 100. That exercise shows that you’ll likely see the cost of your lifestyle double simply due to inflation, and that’s at today’s low inflation rates. Expenses over such a time horizon can add up. Imagine how many roofs or water heaters might need to be replaced on the journey from age 65 to 100. As you age, spending in one area might decline but could be replaced with higher costs elsewhere, particularly for health care. Reviewing health care costs is a topic on its own. But contemplating their potential impact on your retirement planning is a good starting point. A change in your health status or an adverse medical diagnosis should also be a cause to revise your planning.

Any discussion of retirement planning will include the topic of the Canada Pension Plan. In the face of increasing longevity, it’s worth delaying when you start your pension, which will increase the amount you’ll collect over your lifetime. A recent blog post, “When Should I Start my CPP Payments?” covered just this topic.

Portfolio construction going into retirement has traditionally involved reducing your percentage of equities as a form of risk management. But when your time horizon could be measured in thirty or forty years, a new risk becomes important: that you might run out of money before you run out of time. A “safe” investment strategy with more money in fixed income may not allow your assets to keep pace with inflation. This problem is further compounded when you consider the current low interest rates.

The prospect of living to 100, or close to it, might not feel real to some. But we do know it’s happening and will happen to more and more people. Determining your longevity is just a guess. But your retirement planning should consider a potentially long life span.

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